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Columbia Sportswear Reports 24% Surge in Q2 Sales

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Columbia Sportswear Reports 24% Surge in Q2 Sales

Surfersvillage Global Surf News, 23 July, 2010 : - - Columbia reported net sales of $221.8 million for the quarter ended June 30, 2010, an increase of 24% compared to net sales of $179.2 million for the same period of 2009, with 2 percentage points of that increase resulting from changes in foreign currency exchange rates.

Highlights:

Second quarter 2010 net loss was $10.6 million, or 31 cents per diluted share, compared to net loss of $9.9 million, or $(0.29) per diluted share, for the second quarter of 2009.
The company raised its outlook for full year 2010 net sales to increase 14 to 16% and maintained its outlook for operating margin of approximately 7%.
The board of directors declared a quarterly dividend of 18 cents per share, payable on Aug. 26, 2010 to shareholders of record on Aug. 12, 2010.
The company’s cash and short-term investments at June 30, 2010 totaled approximately $398 million with no long-term debt.

“Results for the second quarter, our smallest revenue quarter of the year, were better than our April outlook, primarily due to stronger reorders and fewer cancellations in our U.S. wholesale business and higher than expected sales from our retail stores, leading to double-digit growth in every product category.”

Second quarter net loss totaled $10.6 million, or 31 cents per diluted share, compared with a net loss of $9.9 million, or 29 cents per diluted share, for the same period of 2009.

“While the consumer retail environment remains uncertain, we are optimistic about the upcoming Fall season, including the global launch of our innovative Omni-Heat warmth technologies. Omni-Heat’s launch will be supported by the largest and most highly integrated marketing campaign in the company’s history. In addition, our Sorel brand is poised to have a breakout year as more leading footwear retailers embrace the brand and more women realize they can get great fashion in a winter boot without sacrificing great performance.”

Second Quarter 2010 Results

The second quarter is the company’s smallest revenue quarter, historically accounting for approximately only 15% of annual net sales. As a result, regional, category and brand net sales results often produce large percentage variances in relation to the prior year’s comparable period due to the small base of comparison and shifts in the timing of shipments.

The 24% increase in second quarter 2010 sales compared with the second quarter of 2009 was driven by 27% growth in the U.S. to $123.7 million; 30% growth in the LAAP region to $51.8 million, including a 9 percentage point benefit from changes in foreign currency exchange rates; and 15% growth in the EMEA region to $38.6 million, including 1 percentage point negative effect from changes in exchange rates. These increases were partially offset by a 3% decline in Canada sales to $7.7 million, including a 13 percentage point benefit from changes in exchange rates. (See “Geographical Net Sales” table below.)

Compared with the second quarter of 2009, second quarter 2010 sportswear sales increased 24% to $121.9 million, outerwear sales increased 24% to $43.4 million, accessories and equipment sales increased 45% to $17.8 million, and footwear sales increased 16% to $38.7 million.

Columbia brand sales totaled $199.4 million in the second quarter of 2010, a 23% increase compared with the second quarter of 2009. Mountain Hardwear brand sales increased 39% to $18.3 million. Sales of Sorel, Montrail and Pacific Trail brand products were insignificant during the second quarter of both years.

The company ended the second quarter of 2010 with approximately $398 million in cash and short-term investments, compared with approximately $318 million at June 30, 2009. Inventories increased 6% to $310.5 million at June 30, 2010, compared to $293.4 million at June 30, 2009.

2010 Financial Outlook

The current economic environment, which involves high unemployment rates in many of our key markets and restricted credit markets for consumers and retailers, among other challenges, reduces the predictability of retailer and consumer demand. All projections related to anticipated future results are forward-looking in nature and are based on backlog and forecasts, which may change, perhaps significantly.

The company raised its outlook for full year 2010 net sales to increase 14 to 16% compared with 2009, based primarily on actual first half results, the previously announced 19% increase in Fall 2010 order backlog, and incremental direct-to-consumer sales.

2010 gross margins are expected to increase approximately 75 basis points compared to 2009 gross margins of 42.1%, due to a higher proportion of full price sales in our wholesale business, an increased proportion of direct-to-consumer sales, and more favorable foreign currency hedge rates, and increased costs to expedite production and delivery of Fall orders to customers.

Selling, general and administrative expenses are expected to increase approximately 75 basis points as a percentage of sales due to a combination of several factors, including the effect of the company’s retail expansion, increased marketing investments to support the global launch of the company’s Fall 2010 products, reinstatement of personnel and benefit programs that were curtailed or postponed in 2009, incremental costs related to IT infrastructure and business process initiatives in preparation for a new multi-year ERP implementation, and transitional costs associated with internalizing the sales organizations in North America and Europe.

As a result, full year 2010 operating margin is expected to approximate full year 2009 operating margin of approximately7%. The company is currently planning a full-year income tax rate of approximately 28%.

The company expects a mid-teen percentage increase in third quarter 2010 sales compared with the third quarter of 2009, driven by the previously announced increase in advance seasonal orders, coupled with increased direct-to-consumer sales. Third quarter 2010 operating margin is expected to contract approximately 200 basis points compared with the third quarter of 2009. This expected operating margin contraction consists of approximately 100 basis points of gross margin contraction and 100 basis points of SG&A expansion. The anticipated gross margin contraction is due primarily to incremental costs to expedite production and delivery of Fall 2010 orders.

Third quarter SG&A expansion is consistent with the factors contributing to the increase in full year SG&A.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2010			2009			2010			2009

Net sales	$	221,831		$	179,268		$	522,237		$	451,234
Cost of sales		124,909			104,961			298,011			266,432
Gross profit		96,922			74,307			224,226			184,802
		43.7	%		41.5	%		42.9	%		41.0	%

Selling, general, and administrative expense		113,458			92,246			228,997			194,255
Net licensing income		1,819			2,053			2,544			3,961
Loss from operations		(14,717	)		(15,886	)		(2,227	)		(5,492	)

Interest income, net		392			566			926			1,480
Loss before income tax		(14,325	)		(15,320	)		(1,301	)		(4,012	)

Income tax benefit (expense)		3,721			5,442			(75	)		1,032
Net loss	$	(10,604	)	$	(9,878	)	$	(1,376	)	$	(2,980	)

Net loss per share:
Basic	$	(0.31	)	$	(0.29	)	$	(0.04	)	$	(0.09	)
Diluted		(0.31	)		(0.29	)		(0.04	)		(0.09	)
Weighted average shares outstanding:
Basic		33,800			33,904			33,767			33,888
Diluted		33,800			33,904			33,767			33,888